Directors Duties, Restall's Paper, Minority Shareholder Protection

Question 1

Director duties
- what do they manage
- how do they get in position
- who do they put in position
- what do they not have to be
- where are their duties owed to and not to

Answer 1

management of corporation
elected by shareholders
elect officers
don’t have to be shareholder
duties owed to corporation not shareholder

Question 2

Director duties and the law with authority

Answer 2

authority but no restrictions as long as were acting appropriately to corporation they were protected

Question 3

Directors and if didn’t meet fiduciaries

Answer 3

had duties but if fail to follow then liable to someone

Question 3

fiduciaries roman definition and 3 things involved

Answer 3

person holding character of trustee in respect to the trust.
Confidence
high level ethics (scrupulous),
good faith and honesty (candour)

Question 4

fiduciaries textbook definition

Answer 4

person having duties created by undertaking to act primarily for another’s benefit in matter

Question 5

1. Directors - care and skill - 2 meanings
2. Two exceptions of greater diligence

Answer 5

exercise reasonable care and cannot be negligent carrying out duties.

Accountants and lawyers have higher standard

Question 6

directors - good faith (bona fides)
Conflict of interest 2 actions

Answer 6

1. disclose an interest in contracts with the company and not act in voting
2. act in best interest of corporation or client

Question 7

Restall’s Paper - Exam
Corporation act section 115 and 117

Answer 7

common law duties evolved from equity are incorporated in corporation act to codify duties

Question 8

Restall’s Paper - Exam
Potential liabilities of directors

Answer 8

of directors are expanded beyond merely what are the common law duties

Question 9

Restall’s Paper - Exam: New variety of director liabilities: Gatekeeper Liabilities

Answer 9

attempt to control wrong doing of companies by making directors liable through duties

Question 10

Gatekeeper Liabilities:
Consists of?
how does it protect government?
some duties owed to?
how many statutes

Answer 10

financial, penalty nature for directors
revenue from corporations
individuals etc shareholder, employee, creditor
over 400

Question 11

Gatekeeper Liabilities Rational

Answer 11

normal sanction and liabilities pointed to corporation/business are insufficient tor reduce corporate wrong doing

Question 12

Gatekeeper Liabilities Solution

Answer 12

To prevent repetitive wrongful acts, corporation is not only sued but now third party involvement so directors liable and take prophlactic actions

Question 13

Gatekeeper Liabilities Example (3-4)

Answer 13

• BOD not remitting EL, CPP or income tax
• debt liable to employees for up to 6months
• environmental legislation (jail time)
• directors liable if they quit during crisis

Question 14

Social standpoint on corporations and people taking a board of director job

Answer 14

corporations create prosperity but with limited liability and business liabilities, reasonable people won’t take job as there are damages with prosperity

Question 15

Minority Shareholder protection types (2)

Answer 15

Derivation action
Oppression remedy

Question 16

Derivation Action and why few people do this method

Answer 16

• shareholder can sue BOD in name of company for wrong doing company
• court requires high deposit and costs upfront

Question 17

Oppression Remedy

Answer 17

appeal to the court that they have been oppressed, and unfairly treated by BOD and so entitled to remedy

Question 18

Oppression Remedy examples (3)

Answer 18

court dissolves company and disperse capital themselves
forced purchase of shares
give away particular assets

Question 19

1970 amendments to corporation act to help shareholders (4)

Answer 19

• Disclosure of company affairs
• 5% appeal to court for inspector and shareholders attend
• shareholders right to vote and make change if majority more than 2/3
• proxy votes

Question 20

1970 amendments to corporation act to help shareholders - disclosure of company affairs (2)

Answer 20

financial statement
document insider trading

Question 21

1970 amendments to corporation act to help shareholders - proxy votes (1)

Answer 21

permissible for shareholders to have others vote for them. Managers get more control as get proxies

Question 22

Fundamental Change to Amendment for Shareholders

Answer 22

changing articles of corporation, need 75% of majority of each share class

Question 23

Best Protection of shareholders and why?

Answer 23

Unanimous Shareholder Agreement.
Frees shareholders from fiduciary duties and restrict directors to behaviours identified under the agreement

Question 24

Actions under best protection of shareholders (3-5)

Answer 24

1. Employment opportunities
2. Majorities for actions to occur
3. Capital Control
4. Board of Directors Elections and determine duties
5. Share Control Clause

Question 25

Actions under best protection of shareholders: Share control clause -shotgun

Answer 25

shotgun clause: allows parties to free themselves from a difficult situation, protects you if you have lack of money. Create fair market value of share to sell or buy

Question 26

Criteria for selection between basis forms of business entities (1-4)

Answer 26

1. Limited Liability and nature of business - what are the risks
2. Tax advantages
3. Desirability of perpetual existence
4. Estate Planning - how do you disburse it, minimize tax

Question 27

Criteria for selection between basis forms of business entities (5-8)

Answer 27

5. Number of proposed proprietors
6. Relation to proposed proprietors
7. Borrowing requirements and relation to lenders
8. Available funding etc grants

Question 28

Criteria for selection between basis forms of business entities (9-13)

Answer 28

9. Employee ownership
10. Costs
11. Flexibility of structure
12. Income tax consideration
13. Applicable Government requirements/regulations

Question 29

American Behaviouralists and reward

Answer 29

Reward for action that will lead to reward. Calibrate reward for work

Question 30

Pavlovian Classical Conditioning with reward

Answer 30

Rewarding someone for action, but remove reward while keeping the action